Verizon says data-gathering does not violate Wiretap Act because the data cannot be linked to a single customer, but advocates cry foul

Verizon Wireless is in the crosshairs of privacy advocates challenging the company's claim that it may legally collect customer data on app usage, geographical locations and Web browsing and sell it to advertisers.

The carrier's data-gathering activities drive its Precision Market Insights service, which also provides demographic information, such as age range, gender and the zip codes of where groups of customers, work and shop. Verizon also combines its information with data drawn from third-party databases to provide more detailed segmentation of its customer base.

"Now you can gain a 360-degree view of your target audience like never before," Verizon says on the Insights website. "Our base is derived from a sample of the 94+ million loyal Verizon Wireless customers."

Advertisers pay for such information in order to deliver advertising based on people's interests. But the depth of Verizon's data mining has privacy advocates crying foul.

As a wireless carrier, Verizon falls under the federal Wiretap Act, which prohibits telephone, broadband and wireless providers from gathering customer data. The act was originally passed to prevent telephone companies from listening in on customers' conversations.

Verizon has a much different interpretation of the law. The company's lawyers have found its data-gathering activities legal because the data sold is based on aggregated information, so none of it can be linked to a single customer. Also, Verizon customers have been notified about the data gathering and may opt out at any time.

Verizon did not respond to a request for comment Wednesday. But in a statement sent to CNET, the company said, "The Precision program complies with the law and protects the privacy of our customers."

The Electronic Frontier Foundation, a watchdog group for consumers' digital rights, argues that Verizon violates the Wiretap Act in harvesting data, irrespective of what the company does with it later.

"The Wiretap Act prohibits interception -- the actual act of stepping in to obtain people's content," EFF lawyer Hanni Fakhoury said Wednesday. "What you do after the fact is certainly important, but the violation of the Wiretap Act has already occurred."

What legalizes Verizon's activity is the notification to customers and the ability to opt-out at anytime, which courts have ruled is a legitimate way to seek permission. "They're biggest out is the consent," Fakhoury said.

The American Civil Liberties Union argues the use of opt-out consent is open to court challenge, because there is no definitive ruling on whether it is actually informed consent. Studies show people seldom read companies' privacy agreements and are more likely not to contribute to such data gathering if they have to agree to participate first.

"Verizon offers an opt-out that is useless," said Christopher Soghoian, principal technologist with the ACLU's Project on Speech, Privacy and Technology.

Collecting customer information in a database also presents other problems for Verizon subscribers, since their personal information can be subpoenaed in government investigations. "We think the collection is the most nefarious part of this," Soghoian said.

Privacy issues aside, what also rankles the ACLU is that Verizon customers pay a monthly fee for wireless and data services, while providing personal data without compensation. Google, Facebook and Microsoft also collect user information, but many of their services are free.

"There's no quid pro quo here. This is only upside for the phone company," Soghoian said.

The ACLU has not said whether it would challenge Verizon in court. The group has called on Congress to overhaul the 1986 Electronic Communications Privacy Act in order to clarify such issues as the definition of proper consent.

In the meantime, privacy issues will have to be addressed in the courts, at the state level or by federal agencies, such as the Federal Communications Commission and the Federal Trade Commission.